User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday December 14, 2009 - 12:40:19 GMT
Lloyds TSB Financial Markets -

Share This Story:
| | Email

Economics Weekly - UK PBR: fiscal austerity delayed until recovery becomes entrenched; Weekly economic data preview - Fed to reiterate low interest rates warranted for an ‘extended period’

Economics Weekly - 14 December 2009


UK PBR: fiscal austerity delayed until recovery becomes entrenched



In terms of the stance of fiscal policy there is little new in the chancellor’s 2009 Pre-Budget Report compared with Budget 2009. It confirmed that government borrowing would continue to bridge the gap between government revenues and government receipts opened up by the financial crisis and the recession. This means that the budget deficit will be close to 13% of gdp in the next financial year. In the last financial year, borrowing has been revised up by £5.4bn to £95.4bn. In the current financial year, the budget deficit has been revised up by £2.6bn to £177.6bn.

This is a little less than expected but nevertheless confirms a picture of continued government borrowing in order to ensure that economic recovery takes hold. Predictions for 2010-11 have also been revised up modestly to £176bn from £173bn in budget 2009. Projections further out are little changed, with the budget deficit in 2013-14 expected to be £96bn – a rough halving compared with borrowing for this year and next. Both this year’s and next year’s gdp projections are in line with the consensus. Beyond that, however, the economic growth projections are higher than the consensus.


Fiscal arithmetic

The UK government has a delicate balancing act between ensuring economic recovery takes hold, and therefore not tightening policy too soon, and yet giving sufficient confidence to financial markets that it is tackling the widening debt position in future years. Even if the halving of the fiscal deficit is achieved in 2013/14, it will still leave the UK with outstanding debt to gdp of nearly double the level prior to the onset of recession in 2008. The actual debt to gdp ratio of around 80-90% will be in line with international norms for advanced economies. However, stabilising at that level, implies that the yearly borrowing that the PSBR shows will have to cease.


Economic outlook

The chancellor’s medium-term gdp projections were unchanged from those published in the April Budget. After dropping by a revised 4.75% this year, the Treasury expects gdp to grow by 1-1.5% in 2010, and by 3.25-3.75% in both 2011 and 2012. While the forecasts for this year and next are in-line with the consensus of independent forecasters, they remain more upbeat further out. Moreover, the recovery relies heavily on a rebalancing away from consumer spending towards investment and net exports. With little in the way of additional fiscal restraint announced, the anticipated improvement in the public finances requires a sustained economic recovery. If this fails to occur, the government may be left having to tighten policy more aggressively to meet its stated target of halving the deficit by 2013/14.


Company impact

Further measures were announced in the PBR to support small and medium-sized companies, including the deferment of the planned increase in small companies’ corporation tax rate, and infrastructure and innovative industries. Employer national insurance contributions, however, will rise by a further 0.5% from 2011-12.


Financial market reaction

What has been the market reaction to the 2009 Pre- Budget Report (PBR)? Looking at the equity market,

the reply has to be that, on balance, it has been negative. After the PBR, the FTSE 100 closed lower on the day, but was higher at Friday’s close. In which industry sectors did the largest declines occur? Using the FTSE All Share index breakdown by industry, it appears to have been largely in construction materials and in real estate investment trusts. Oil and gas and pharmaceuticals and biotechnology were also negatively impacted, though more modestly. This market reaction, however, should not be exaggerated: overall, the change has been small. December’s PBR did little to alter the underlyingarithmetic of the debt / borrowing nexus compared with what was in the 2009 Budget itself, and in financial market expectations of what was likely to be in the PBR.


The three month Libor rate was unchanged on Thursday after the PBR, after falling modestly on Wednesday. Commentary around the need for further fiscal tightening persisted, even after a PBR that starkly showed the intention for a sharp reduction in the level of borrowing, highlighting the likelihood that official short term interest rates will stay low for some considerable time. True, the level of debt does not fall, but the amount borrowed is planned to fall dramatically. In this scenario, it is clear that there will be pressure on monetary policy to offset some of the fiscal tightening that is planned.


Sterling was already trending lower before the PBR but continued its slide afterwards. Worries about the UK’s credit rating as the deficit climbs, and especially in view of Greece’s recent rating downgrade, seems to be putting selling pressure on the currency. But the move has not been large, under 1%.


Bond yields rose on the PBR, as gilt prices fell back. However, gross bond issuance was not materially higher than already announced in Budget 2009. Bond prices were falling ahead of the PBR and continued to do so afterwards. Of course, there was also turbulence in financial markets about the risks for sovereigns from rising debt and higher government borrowing. The PBR did not halt the rise but neither did it precipitate it. All in all, the PBR seems to have been received as a work in progress in financial markets, with rising speculation about what will be unveiled in the next actual Budget, due in spring 2010.

Trevor Williams, Chief Economist, Corporate


Editorial comments to:

Trevor Williams

Chief Economist

Lloyds TSB Corporate Markets

Economic Research

10 Gresham Street

London, EC2V 7AE

Tel: +44 (0)20 7158 1748


Weekly economic data preview - 14 December 2009


Fed to reiterate low interest rates warranted for an ‘extended period’


􀂄 The Federal Reserve’s open market committee (FOMC) is expected to follow the recent decisions by the ECB, BoJ and BoE and keep interest rates pegged at a record low of 0-0.25% on Wednesday. However, in the accompanying press statement, financial markets will also be looking for confirmation that the FOMC still believe that this is likely to remain the case for an ‘extended period’. After the comments from Fed chairman Bernanke last week, playing down market expectations of an early rise in US interest rates, they are unlikely to be disappointed. We forecast the first hike sometime in the second half of 2010. The Fed’s main focus for now is likely to remain on how to continue with its various ‘non conventional’ schemes in place to support credit markets and economic activity. We believe there is a small risk of an extension to the previous timetable of asset purchases next year. The BoJ is expected to keep its overnight interest rate at 0.1% on Friday, with the recent intensification of deflation suggesting this may remain the case throughout 2010. In other events, the Senate Banking Committee holds a confirmation vote for the nomination of Fed chairman Bernanke to a second term on Thursday. The BoE will publish its Quarterly Bulletin on Monday and its December Financial Stability and Trends in Lending reports on Friday.


􀂄 It is a busy week for economic data this week, with financial markets searching for clues about both the pace of recovery and future inflationary trends. There are a host of consumer price indices released this week, including in the US, UK and euro zone. Figures for the UK are published tomorrow, with the annual CPI rate forecast to nudge up slightly to 1.6% in November from 1.5% in October. The headline retail prices index (RPI) is expected to rise to 0.3% y/y, up from -0.8% in December and the first positive reading since January. November inflation data for the US and euro zone, due on Wednesday, should also show prices rising for the first time in several months. We look for US annual CPI inflation to accelerate sharply to 1.8%, up from -0.2% in October, primarily reflecting the recent rise in energy prices compared to the sharp falls late last year. The revised euro zone data are expected to show no change from the initial estimate of 0.6% in November, up from -0.1% in October. Although global annual inflation rates are likely to show further strong increases in coming months, we believe that any concerns about resurgent inflation are premature given the vast amount of spare capacity at present. For us, the risks of inflation and deflation further out are  still relatively closely balanced at this time.


􀂄 Following last week’s Pre-Budget Report (PBR), the UK’s public finances will again come under close scrutiny on Friday. We forecast the latest monthly data to show public sector net borrowing of £27.6bn in November, up sharply from £15.4bn last year. The data should highlight that although financial markets were relatively unmoved by the levels of projected gilt issuance shown in the PBR in coming years, their support should not be taken for granted. Other prominent UK releases this week include labour market data on Wednesday and retail sales on Thursday. We forecast a modest rise in claimant count unemployment in November, while the ILO unemployment rate is expected to be unchanged at 7.8% in the three months to October. The more restrained rise in UK unemployment compared to previous recessions and to the sheer extent of the recent fall in gdp (see chart) has been a key feature of this downturn. We believe this primarily reflects companies’ preferring to reduce pay and hours to contain labour costs on hopes that the downturn may prove short-lived. The clear risk is that final demand fails to meet their expectations, leading to further job losses next year. We look for the headline measure of average earnings growth to remain weak at slightly over 1% in the three months to October. Although the weak labour market will remain a key constraint on consumer spending for some time, we forecast UK retail sales rose modestly in November.


􀂄 The other key data highlights this week include a series of important surveys in the euro zone, notably the German ZEW and IFO and the December PMIs. We look for the surveys to signal that the overall pace of recovery will be maintained in the final quarter of 2009. The US November producer prices and manufacturing capacity utilisation data are expected to confirm that underlying price pressures remain subdued. Housing starts and permits, on Wednesday, could show a strong rebound after a surprise fall in October.

Jeavon Lolay, Senior Global Macroeconomist


Economic Research,
Lloyds TSB Corporate
10 Gresham Street,
London EC2V 7AE
0207 626 - 1500


Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. The facts and data contained are not, and should under no circumstances be treated as an offer or solicitation to offer, to buy or sell any product, nor are they intended to be a substitute for commercial judgement or professional or legal advice, and you should not act in reliance upon any of the facts and data contained, without first obtaining professional advice relevant to your circumstances. Expressions of opinion may be subject to change without notice. Although warrants and/or derivative instruments can be utilised for the management of investment risk, some of these products are unsuitable for many investors. The facts and data contained are therefore not intended for the use of private customers (as defined by the FSA Handbook) of Lloyds TSB Bank plc. Lloyds TSB Bank plc is authorised and regulated by the Financial Services Authority and is a signatory to the Banking Codes, and represents only the Scottish Widows and Lloyds TSB Marketing Group for life assurance, pension and investment business.



Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."

Actionable trading levels delivered to YOUR charts in real-time.

Register To Test Your Amazing Trader

GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Mon 10 Sep 2018
AA 08:30 GB- GDP, Trade, Output
Tue 11 Sep 2018
AA 08:30 GB- Employment Decision
A 09:00 DE- ZEW Survey
Wed 12 Sep 2018
A 12:30 US- PPI
A 14:30 US- EIA Crude
A 18:00 US- Beige Book
Thu 13 Sep 2018
A 1:30 AU- Employment
AA 11:00 GB- Bank of England Decision
AA 11:45 EZ- European Central Bank Decision
A 12:30 US- Weekly Jobless
AA 12:30 US- CPI
Fri 14 Sep 2018
A 08:30 GB- GDP
AA 12:30 US- Retail Sales
A 13:15 US- Industrial Production
AA 14:00 US- prelim University of Michigan

John M. Bland, MBA
co-founding Partner,

Global-View Affiliate Program

We are starting an affiliate program to market some of our products.

Send me an email if you would be interested or if you know someone who would like to be an affiliate. Generous commissions payout for those accepted.

Put the word "affiliate" in the email subject line.

Contact us

Start trading with forex broker Markets Cube

Max McKegg's Daily Forex Trading Forecasts

Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.

Request a TRIAL of Max's Forex Service.


Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map

Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.



By using this website, you are agreeing to our Privacy Policy and Terms of Use, and Cookie Policy

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105